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BlackRock has announced that it is to extend the voting options available to individual investors, with the world’s largest asset manager stating that it is to work alongside Proxymity, a digital investor communications platform based in London, to expand BlackRock’s to retail investors for the 2023 AGM season in select UK mutual funds.

In addition, the November update will also see individual investors benefit from an expansion of eligible investment strategies, as well as an extension of the voting policies that they can choose from. Clients participating in global separately managed accounts (SMAs) and eligible pooled vehicles will now be able to select one of seven Glass Lewis proxy voting policies, including an upcoming global policy, the Glass Lewis Governance-Focused Policy, in addition to the seven ISS policies that have been available since the asset manager’s Voting Choice programme was launched back on 1 January 2022.

In BlackRock’s to its clients and corporate CEO, the asset manager’s long-standing combined chair and chief executive, Larry Fink, stated the following regarding the November update:

‘Until now, technological, operational, and regulatory hurdles have, for the most part, allowed us to offer voting choice only to certain institutional investors like pension plans, endowments, and insurance companies.

As I’ve said before, my hope is that in the future, every investor—ultimately including individual investors—has access to voting choice, if they want it.

That’s why I’m so pleased that BlackRock today also announced we are working with a digital investor communications platform in the UK to enable investors in select mutual funds to exercise choice in how their portion of eligible shareholder votes are cast. This is an industry first to translate individual investor views into voting instructions.’

BlackRock’s update remedies one of the shortcomings of its Voting Choice programme, which was launched back in January 2022—namely the lack of any ability for retail investors to influence voting decisions (for more information, see: BlackRock’s voting option enfranchisement of little use for retail investors). , consultant at Fladgate LLP, had the following to say on BlackRock’s update:

‘One of the principles of English company law has always been that shareholders have the right to vote their shares, unless such shares do not carry a vote. In publicly quoted companies it was the practice for each shareholder’s name to be entered onto the register of members and for that shareholder to hold the legal title to the shares and receive a certificate of ownership. This gave each such shareholder the right to vote, receive communications from the company and exercise all the rights of being a shareholder. The only exception was if the shareholder chose for his shares to be held in a nominee name. In that case the nominee would be the legal owner of the shares and have the rights of ownership with the beneficial interest in the shares belonging to the ultimate economic owner.

In the late nineties publicly quoted shares started to be held in electronic form rather than in the old way of holding physical certificates. In the UK, such shares have been held in CREST. Members of CREST are pension funds, brokers or large financial institutions. In theory there is nothing to prevent a retail investor becoming a member, but in practice this does not happen. The consequence of this is that small investors have in effect lost the opportunity to exercise their shareholder rights. Almost all quoted shares are now held in CREST and retail investors will have their shares held by a broker nominee company or trading platform, who will exercise these rights. The terms of any arrangements with the broker or platform could require the consent of the underlying shareholder, but this rarely if ever happens in practice.

I therefore very much welcome the announcement by Blackrock that they have agreed with Proxymity to work together on building a solution to enable investors choose how the voting rights attaching to their shares should be exercised. The devil, as always will be in the detail, but this appears to be a big step forward in giving back voting rights to shareholders and particularly retail ones, who have been disenfranchised since shares in UK publicly quoted companies became held in electronic form. It is to be hoped that others will follow Blackrock’s lead.’

The update comes as BlackRock is taking flak from both the left and right in the US. Climate change activists have long targeted the asset manager for its apparent failure to use its fiduciary responsibilities to push for faster environmental change at issuers in high carbon emission industries. On the other hand, many Republican-governed US States, including Louisiana, South Carolina, Utah, Arkansas and Missouri have divested, or plan to divest, from BlackRock on the grounds of the asset manager’s pro-ESG stance on corporate governance issues. Speaking at the of the Institute for International Finance, Fink replied when questioned on the common belief that BlackRock was anti-energy that: ‘facts were not important with certain sub-groups in this country’. He went on to state that: ‘I’m now being attacked equally by the left and the right, so I’m doing something right, I hope. I don’t know. It’s painful, but, you know what, we’re moving forward.’

BlackRock released its latest on 13 October 2022, which showed that its assets under management (AUM) fell from £7.40trn ($US8.48trn) to £6.95trn ($US7.96trn) over the three month period. This is also down on £87.3trn ($US10.0trn) AUM at the end of the asset manager’s .

However, the asset manager is not the first money manager to seek the voting preferences of individual investors. On 13 October 2022, Schwab Asset Management, an arm of The Charles Schwab Corporation, became the first large asset manager to a new proxy polling solution created by Broadridge Financial Solutions Inc. The solution is to allow Schwab Asset Management to poll fund shareholders in order to discern how they would prefer to vote in relation to key proxy issues. According to its combined chief executive and chief investment officer, Omar Aguilary, the asset manager is:

‘proud to be a leader in piloting this new tool for shareholder engagement. Broadridge’s new solution aims to provide an efficient and scalable way to gather general preferences across a large base of shareholders […] Via the new service, investors will complete a survey that will provide insights into investors’ priorities on  a range of core proxy issues concerning maximising long-term shareholder value, company policies, corporate governance practices, and environmental and social issues. Shareholders will not be surveyed on specific proxy ballots.’

The pilot is to involve the shareholders of one Schwab Fund and two Schwab ETFs—the Schwab 1000 Index Fund, the Schwab 1000 Index ETF, and the Schwab Ariel ESG ETF.

On 2 November 2022, Vanguard Group, BlackRock’s rival and the world’s second largest asset manager, also that it was to pilot a number of proxy voting policy options for individual investors in several of the equity index funds managed by the asset manager:

‘We’re encouraged by our discussions with clients, industry partners, and policymakers on this topic, and are making progress to address the significant operational hurdles involved. In early 2023, we will pilot a number of proxy voting policy options for individual investors to choose from in several Vanguard-managed equity index funds. We plan to gather client and stakeholder feedback as we test this approach and explore the full range of options with respect to proxy voting choices for index funds.’

These pilots could be the start of a greater democratisation of shareholder voting, with large institutional investors no longer holding sway over their smaller counterparts with regards to the power to make voting decisions. However, it will be interesting to see how many retail investors will make use of these new voting powers, or whether most will instead continue to hand the responsibility to institutional investor governance teams or delegate to a proxy adviser proxy voting policy.